Uganda’s central bank has issued a strong warning over the proposed Protection of Sovereignty Bill, 2026, cautioning that while it is framed as a tool for political independence, it could carry significant economic consequences.
The Bank of Uganda argues that true sovereignty is not only political, but also financial. Without stable capital inflows, currency stability, and investor confidence, economic independence becomes difficult to sustain.
“National sovereignty must be supported by economic strength and financial stability,” the central bank noted, warning that the Bill could undo years of financial liberalization that have supported Uganda’s growth.
A key concern is the treatment of diaspora remittances. The Bill broadly classifies foreign inflows in a way that could include Ugandans living abroad. This is significant because remittances, estimated at about USD 1.5 billion, are a major source of foreign exchange and household income.
The Bank of Uganda warns that disrupting these flows could weaken foreign reserves and place pressure on the Ugandan shilling. A weaker currency would quickly translate into higher import costs, pushing up prices for fuel, food, and essential goods.
“The moment foreign exchange inflows are restricted, pressure builds on the currency, and inflation follows,” the Governor cautioned.
The central bank also raised concern over proposed restrictions on foreign financial support, including a UGX 400 million approval cap. It warned that such limits could slow investment, complicate banking operations, and reduce Uganda’s attractiveness to international lenders.
Another controversial provision is the criminalization of publishing economic or financial analysis deemed harmful to the economy. The Bank of Uganda warned that this could undermine transparency and distort how markets assess risk.
“In modern financial systems, transparency is essential for trust. Limiting information distorts decision-making,” the report noted.
It further warned that international correspondent banks could reassess their relationships with Ugandan institutions if compliance risks increase, potentially isolating the country from global payment systems.
Ultimately, the Bank of Uganda urged lawmakers to revise the Bill to protect financial stability. It recommended exempting regulated financial institutions, removing overly restrictive provisions, and ensuring that Uganda’s long-term growth strategy remains intact.
The warning highlights a broader tension between political control and economic openness. While the goal of safeguarding sovereignty is clear, the central bank cautions that restrictive economic policy could unintentionally weaken the very independence it seeks to protect.